DoF: 2018 rate hikes drag PH growth
Credit to Author: MAYVELIN U. CARABALLO, TMT| Date: Thu, 10 Oct 2019 16:15:30 +0000
THE cummulative 175 basis-point interest rate hikes implemented by the Bangko Sentral ng Pilipinas last year slightly pulled down Philippine economic growth this year, according to the Department of Finance (DoF).
In an interview on Wednesday, Finance Undersecretary Gil Beltran said last year’s higher interest rates dragged the country’s gross domestic product (GDP) growth by “about 0.4 percent so far.”
This was after these rate hikes dragged this growth by 0.2 percent last year, he added.
Last year’s actual GDP growth settled at 6.2 percent, which falls at the lower end of the government’s downwardly revised 6.0 to 7.0-percent target.
Economic growth stood at 5.5 percent in the first half of 2019, well below the government’s target range of 6 to 7 percent.
While acknowledging the impact of interest rate hikes to economic growth, Finance Secretary Carlos Dominguez 3rd said slower government spending remained the main reason for the weak economic expansion.
“Let’s put it this way: Government spending is just 20 percent of GDP, but it’s a critical 20 percent, because it is spent on infrastructure,” he explained. “And infrastructure has a huge multiplier effect. So [if] you start cutting down on infrastructure expenditures…you are not going to have as many sales of cement and everything.”
The first-half GDP growth of 5.5 percent — the result of the slower-than-expected 5.6 percent and 5.5 percent GDP expansions in the first and second quarters, respectively — was attributed to lackluster state spending, which economic managers blamed on the delayed approval of the 2019 national budget.
Despite this, Dominguez remains optimistic that the government’s expenditure catch-up plan would boost state spending in the second half.
“Well, so far, the weather has been okay. So it’s picking up. But as I [have] said, we’re not driving a Ferrari if we step on the gas. It’s not zero to 60 in three seconds,” he said.
The government’s catch-up plan set an infrastructure spending target of P792.97 billion for the second to fourth quarters after actual infrastructure spending reached P207.2 billion in the first three months of 2019.
Supporting Dominguez’s view, the Bureau of the Treasury reported that infrastructure spending boosted overall public expenditure in September, as the actual figure grew by double digits from a year earlier.
“For September, preliminary government spending data based on our cash flow indicates double-digit growth of 34.6 percent year-on-year. Primary expenditures in September grew 34.9 percent,” Deputy Treasurer Sharon Almanza said.